MONTPELIER, Vt. (Legal Newsline) — The U.S. Department of Labor (DOL) announced a lawsuit Jan. 5 against First Bankers Trust Services Inc. and Sonnax Industries Inc. and its owners for alleged violations of the Employee Retirement Income Security Act.
“The department alleges the defendants breached their fiduciary responsibilities to act solely in the interest of the plan and its participants with care, skill, prudence and diligence, and solely in accordance with the plan’s documents as required by law,” said Susan Hensley, the department's regional director in Boston.
“Instead, they placed their own interest above those of the plan’s participants who put their trust in the plan, its trustee and other fiduciaries.”
According to the DOL, Sonnax and officers Tommy Harmon, CEO, and Frederick Fritz, a board member, hired First Bankers in 2010 as an independent fiduciary to advise Sonnax’s ESOP. An ESOP is a retirement plan in which some or all assets are invested in employer stock.
The benefits for ESOP participants depend on the ESOP buying and selling stock for fair market value. On Jan. 3, 2011, the company purchased all of Harmon’s and Fritz’s stock shares and issued new shares sold to the ESOP. The Labor Department alleges the calculations used to make this decision were flawed.
“The alleged actions taken by the defendants improperly disadvantaged the ESOP and its participants,” said Michael Felsen, the department’s regional solicitor in New England. “We’ve filed this suit so that the losses are restored to the plan and other corrective action will be taken for the benefit of the participants.”